The Department of Labor’s Employee Benefits Security Administration (EBSA) issued Technical Release 2013-04, describing its position on the recognition of same-sex couples with respect to employer retirement plans and other employee benefits as a result of the Supreme Court’s decision in United States v. Windsor.
On June 26, 2013, the Windsor decision struck down part of the Defense of Marriage Act that denied federal benefits to legally married, same-sex couples. In the technical release, EBSA provides guidance to retirement plans, fiduciaries, participants and beneficiaries on the Supreme Court decision's impact on pension law (i.e., the Employee Retirement Income Security Act of 1974 (ERISA)).
The release states that, in general, the terms "spouse" and "marriage" in ERISA and in related DOL regulations should be interpreted to include same-sex couples legally married in any state or foreign jurisdiction that recognizes such marriages, regardless of where they currently live. However, same-sex couples in domestic partnerships and civil unions will not be treated as married. Note that EBSA is taking the same position the IRS has taken in IRS Revenue Ruling 2013-17, which states that same-sex marriages performed in a state that recognizes that marriage will be recognized for federal tax purposes.
EBSA’s position will impact employer retirement plans, such as a 401(k) plan. Specifically, a same-sex married spouse who is named as the beneficiary of his or her spouse’s employer retirement plan would be entitled to spousal benefits that have previously been available to opposite-sex married couples. One of these benefits would be the ability of the same-sex spouse beneficiary to do a spousal rollover to his or her own IRA when the plan participant dies.
EBSA protects the retirement and health benefits of America's workers, retirees and their families. The agency oversees approximately 701,000 private sector retirement plans, 2.3 million health plans and other plans that provide benefits to more than 141 million Americans. Collectively, these plans hold more than $7.3 trillion in assets.
- By Joe Cicchinelli and Jared Trexler
Smart money/Coming Soon
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Q:
You recently said that a 401(k) distribution would add to your MAGI (modified adjusted gross income) for the purpose of determining if you are subject to the 3.8% healthcare surtax. What about Roth IRA distributions? Would they also count towards your total MAGI income for surtax purposes?
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A:
IRA distributions are exempt from the 3.8% surtax, but taxable distributions from IRAs can push income over the threshold amount, causing other investment income to be subject to the surtax. Because Roth IRA distributions are generally tax-free, they don’t count towards your total MAGI.
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